According to a new study that reveals the extent of commissions it has been revealed that some investors are paying financial planners up to 13 times more than they should.
The study further revealed that commissions to planners were much more than the up-front fees charged by other planners.
David Whiteley executive manager of Industry Super Network said that the commission system had been "central" to financial scandals including Storm and WestPoint that have cost mum, and dad investors hundreds of millions. He further stated, "What you get is a systemic conflict of interest".
Financial planners are kicked back a percentage of clients' money by fund managers under the commission system. The commission system is one front of a long-running war for customers between the industry superannuation funds, which charge no commissions, and the for-profit retail funds, which do.
Studies by actuaries Rice Warner have shown that the commission system was also hurting investors on a day-to-day basis. What this shows is that investors would be better off by paying for actual services rendered rather than a flat fee.
Mr. Whiteley further added that planners should have a legal responsibility to put clients first.